Theory:

Then the swallow came back to the Prince. “You are blind now,” he said, “so I will stay with you always.”

“No, little Swallow,” said the poor Prince, “you must go away to Egypt.”

“No, I will stay with you always,” said the swallow, and he slept at the Prince’s feet.

All the next day he sat on the Prince’s shoulder, and told him stories of what he had seen in strange lands.

“Dear little Swallow,” said the Prince, “you tell me of marvellous things, but more marvellous than anything is the suffering of men and women. There is no Mystery so great as Misery. Fly over my city, little Swallow, and tell me what you see there.”

So the swallow flew over the great city, and saw the rich making merry in their beautiful houses, while the beggars were sitting at the gates. He flew into dark lanes, and saw the white faces of starving children looking out listlessly at the black streets. Under the archway of a bridge two little boys were lying in each other’s arms to try and keep themselves warm. “How hungry we are!" they said. “You must not lie here,” shouted the watchman, and they wandered out into the rain.

Then he flew back and told the Prince what he had seen.

“I am covered with fine gold,” said the Prince. “You must take it off, leaf by leaf, and give it to the poor; the living always think that gold can make them happy.”
Explanation:
 
When swallow came to the Happy Prince, he said he would stay with the Prince forever because he became blind. But Happy Prince asked the swallow to go to Egypt. Swallow refused and said he would stay with him, and he slept between the Prince’s feet. The swallow stayed along with Happy Prince and narrated the stories of the different places he had visited. The Happy Prince told the swallow to tell him wonderful things but added that nothing was more remarkable than people’s suffering. He wanted to know who was sad in his kingdom, and so he asked the bird to go and let him know what he saw while flying over his city. Later, the swallow flew over the city and saw that the rich lived happily in their beautiful houses and were partying.
 
On the other hand, the poor people were sitting outside the gates and begging. The bird went to the dark lanes with no light where the poor people lived. Then the swallow saw that the children were hungry, due to which their faces had turned white and pale.
 
Furthermore, the bird saw two little boys lying in each other’s arms under the bridge's archway. The two boys were lying close to each other to keep themselves warm. It suggests that the children were unable to bear the chillness.
 
Later, the two boys said that “How hungry we are!". Just then, a watchman came and scolded them for being there. The watchman shouted and made them go away from there. The poor children kept wandering in the rain as they were homeless. After noticing everything, the swallow went back to Happy Prince and told him what he had seen in the city. After hearing that, the Happy Prince told swallow that his whole body was covered with fine leaves of gold. So he could take tiny pieces of gold from his body and give them to the poor people. All living beings require money, and when they get gold, they will feel happy.
 
Meanings of the difficult words:
 
S.No
Words
Meanings
1
Marvellous Causing great wonder; extraordinary
2
MiseryGreat unhappiness
3
Merry Cheerful and lively
4
Hungry Feeling or showing the need for food
5
Mystery Something that is difficult or impossible to understand or explain
Reference:
National Council of Educational Research and Training (2006). Moments. The Happy Prince – Oscar Wilde (pp. 28-35). Published at the Publication Division by the Secretary, National Council of Educational Research and Training, Sri Aurobindo Marg, New Delhi.